TransGraph Research Consulting Technology Commodity Price Risk Management solutions Agriculture Metals Energy Currency Economy Mapping the Market Thought of Oil and Oilseeds markets By Nagaraj Meda, MD, TransGraph Consulting Pvt Ltd

Review of GlobOil 2015:BMD CPO 3M Futures Actual: Prices have rallied and placed a high of MYR 2793 during Mar’16 and turned lower towards MYR 2187. TG Forecast: Prices are expected to trade higher towards MYR 2650-2750 in the coming 5-6 months before turning lower towards MYR 2200.

Review of POC 2016 Outlook:BMD CPO 3M Futures TG Forecast: BMD CPO Futures prices are likely to test MYR 2700-2750 and turn lower towards MYR 2150 in the coming 3-5 months. Actual: Prices have posted a high of MYR 2793 and turned weak towards MYR 2200 ahead of turning higher recently.

What we analyze is of immense value to the industry TransGraph over a period of last 13 years have experimented and stabilized our mapping the market thought approach which is a combination of fundamental, technical and statistical analysis. With the blessings of Lord Saraswati, our customer Gods and with the inspiration from distinguished and accomplished fellow analysts, we shall continue to focus, invest and improvise out MTMT approach and prepare the industry and our customers better to manage the price risk.

BMD CPO 3M Futures(USD/MT): Diametric Formation In case of an exception the g-leg is already concluded and prices could extend higher towards MYR 3100. This marks a conclusion of Cycle wave 2 as market enters into a fresh impulse In case of an ideal diametric formation prices could turn lower towards MYR 2187 to place the g-leg during Oct-Nov’16 ahead of a gradual rebound. BMD CPO Futures prices since year 2013 is processing a diametric formation. Within the said formation all the legs tends to be equal in time (not price) while in case of exception one of the leg extends more than 1.618 times or truncates by less than 0.618. The G leg and subsequent price action would suggest a fresh bull market or a Sideways market in the long term.

Key question: has long term impulse 3rd grand wave started? If impulse 3rd grand wave has started we will not see market below 2200 for another 3-4 years, if it is wave C up, after placing the high at 3000+ in Feb/March, by Aug’17 markets will come down next year and then impulse may start. Let us have a look at Fundamentals to arrive at the decision.,

Relative money supply growth prompting stronger Euro Relative interest rates and money supply movement suggesting weaker Dollar in medium term Real Interest rates prompting stronger Euro and possible rate hike in USA Parameter USA EU Interest rate (A) +0.4 0.1 Inflation (B) +1.1 Real interest rate (C=A-B) -0.7 Relative real interest rate (EU-USA) (0-(-0.7)= +0.7 Relative money supply growth prompting stronger Euro Money supply growth rate 7.0% 5.0% Relative money supply growth (EU-USA) 5-7 = -2%

Reversal of Strong dollar weaker commodities on cards? Region TG estimate 2014 2015 2016p 2015 GDP (USD Bn) 2016 GDP increment (USD bn) World 3.40 3.10 3.20 79897 2476 Advanced economies 1.80 1.90 2.00 36790 735 Emerging markets 4.60 4.00 4.20 43108 1811 US 2.40 2.20 16676 367 Euro Area 0.90 1.50 1.70 13555 230 Japan -0.10 0.50 5677 28 China 7.30 6.90 6.50 8804 572 India 7.50 7.80 2359 184 Note: All data in % Change Y/Y, India GDP in FY terms (Apr-Mar) and based on 2011-12 base year in Gross value added (GVA) terms; Indian GDP 2016 is 2016-17 Last 3 years, EU has bridged / bridging the gap with US economy in terms of GDP value. 2252 593 1658 391 200 28 568 165

Growth and Real interest rates support Euro but stimulus limits upside EURUSD is likely to weaken towards support of 1.08 in in the coming 1-2 months and then resume uptrend towards 1.18 in the coming 4-6 months.

Dollar Index to trade mixed between 94 – 97.50 Dollar Index is likely to hold support of 94 on any immediate weakness and gain gradually towards 97.50 in the coming 1-2 months and then resume weakness below 93 over the coming 4-6 months.

Supply – Demand Scenario indicates tighter balance entering into 2017 Bullish factors Strong Chinese demand growth. 6.5% growth from 10.8 MBpd to 11.5 MBpd Productivity issues and low drilling to keep the US crude oil output lower Plateau in supply growth (Iran and Iraq producing at record pace ) and steady demand growth Marginal dip in OPEC supplies due to the lower production in Venezuela, Nigeria and Libya. Product glut likely to shrink by the end of the year. Bearish Factors Distillate demand expected to be tepid during upcoming winter due to possible La-Nina impact. Recovery in Non-OPEC production due to the firm trend in prices.

WTI Crude Oil Price Outlook Price Structure : Prices have placed cyclical bottom at USD 26 in Feb’2016. Price Outlook: WTI Crude Oil, prices are likely to correct towards USD 37 levels and resume the positive trend towards USD 65 in the coming 6 months. Turnaround Level: Early breakout above USD 52 will negate the immediate down side potential and accelerate the bullish trend.

Indian Balance of Payments (USD Billion) Indian Balance of Payments indicating strong fundamentals for Rupee in medium term Indian Balance of Payments (USD Billion) Item 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17p Current Account Merchandise trade balance -189.76 -195.66 -147.61 -144.18 -130.08 -111.00 Invisibles 111.61 107.49 115.21 116.24 107.93 105.00 Total Current Account -78.15 -88.16 -32.40 -27.94 -22.15 -6.00 Capital Account FII 12.80 34.68 8.72 40.93 -4.13 18.10 FDI 34.31 22.42 24.30 32.63 36.02 40.00 Others* 28.52 42.59 22.40 16.40 9.24 -12.00 Total Capital Account 75.64 99.68 55.42 89.96 41.13 46.10 Balance of Payments -4.95 14.21 22.14 61.41 17.90 41.10 *Note: Others include net commercial borrowings, short term loans, banking capital and other capitals

USD/INR : Preferred Elliott Wave Count USDINR is likely to extend corrective gains towards INR 68.5-69 and resume broad weakness below INR 66 in coming 4-6 months.

Soy Complex

US Soybean BS….South American soy crop holds key for 16/17 Attribute USDA 2015/2016 TG Est 2015/16 USDA 16/17 TG Est 16/17 Area Harvested 33.11 33.60 Beginning Stocks 5.19 5.16 5.32 4.94 Production 106.93 114.33 113.40 Imports 0.68 0.64 0.82 Total Supply 112.80 112.74 120.47 119.16 Exports 52.80 52.82 54.02 54.50 Crush 51.71 52.00 53.07 53.50 Feed Waste Dom. Cons. 2.98 3.43 3.62 Total Dom. Cons. 54.69 54.98 56.50 57.12 Ending Stocks 9.95 7.54 Attribute Soy Acreage ( Million acres) Yield ( Bushels/Acre) Production (Mln Bushels) ( Mln ton) USDA acreage 83.04 50.6 4201.82 114.35 TG Acreage 82.02 50.8 4166.62 113.40 Adjustments in US acreage likely to keep production lower than USDA . 16/17 stocks likely to stay at 7.5 Mln ton Vs 4.94 Mln ton last year

Supply squeeze in South america to drive soy complex in OND’16 Parameters Brazil Argentina Ending stocks at the end of August'16 25.83 34.68 Average Monthly Requirements (August-Jan/feb) Crush 3.11 3.15 Exports 2.42 0.94 Domestic consumption 0.30 0.52 Cumulated demand till 16/17 crop harvest 15.56 18.91 12.12 5.65 1.50 3.12 cumulated demand till pre-harvesting phase 29.18 27.68 Ending stocks at pre-harvest period -3.35 7.00 Ending stocks last year during same time frame 4.84 16.95 Need for import Yes May Not  Unit:-Million tons

Will grains have an edge over beans in Argentina Will grains have an edge over beans in Argentina ??...who will fill the shoes ???   Brazil Argentina Variable Corn Soybean Total crop funding cost (A) ($) 369.72 455.06 447.96 472.59 Taxes and Other Expenses (B) ($) 169.11 117.50 192.80 133.91 Financing interest ( C ) ($) 32.39 30.52 36.90 34.77 Total variable cost (A+B+C) =D ($) 571.21 603.08 677.66 641.27 Total fixed Cost ( E ) ($) 77.62 95.42 88.48 62.91 Total incurred cost (D+E) ($) 648.83 698.50 766.14 704.18 Farmers realized price ($) 152.98 298.72 151.00 282.00 Yield MT/Ha 4.28 2.92 8 2.91 Farmer income per Ha ($) 654.75 872.26 1208 820.62 Net realization in USD / Ha 5.92 173.86 441.86 116.44

Argentina Soy oil stocks hint at oncoming tightness despite lower exports … Month 2015 2016 Sep 350 315 Oct 335 297 Nov 370 345 Dec 167 227 Units :KMT

CME Soybean Futures: Elliott Wave Count CME Soybean futures prices are about to conclude intermediate wave 2 and entering into infant stage of intermediate wave 3 within primary wave 3. Prices on any further weakness are likely to find strong support of USc 920-900 and gain towards USc 1200 in coming 3-5 months.

CME Soymeal Futures: Elliott Wave Count CME Soy-meal futures prices are likely to hold above USD 300/285 zone and initiate a bull phase towards USD 380-400 in coming 4-6 months.

CME Soy Oil Futures: Elliott Wave Count CME Soy oil 1M futures placed intermediate wave-[1] at Usc 35.00 and intermediary wave-[2] at 31.50, currently prices are in a intermediate wave-3. Going ahead prices are likely to hold above 31.50 and trade higher towards 38.50/39.00 cents in the coming 5-6 months

Palm Oil Complex

Incremental acreages at main origins for 2016/17 Matured acreages growth from 15/16 to 16/17: Malaysia: 150 Th.Ha Indonesia: 260 Th.Ha

Malaysian & Indonesia Palm oil Yield Projection for 2016/17Year EI-Nino Pattern EI-Nino Years Years Yield(T/ha) % Change(Y-o-Y)   1981-1982 3.95 Very Strong 1982 1982-1983 3.58 -9.51% 1983-1984 3.29 -8.06% 1984-1985 3.56 8.30% 1985-1986 3.97 Moderate 1986 1986-1987 3.35 -15.68% 1987 1987-1988 3.53 5.47% 1988-1989 3.68 4.17% 1989-1990 3.83 1996-1997 1997 1997-1998 3.39 -11.53% 1998-1999 3.70 9.26% 1999-2000 3.67 -0.73% 2000-2001 4.06 2001-2002 2002 2002-2003 4.13 4.77% 2003-2004 -1.72% 2004-2005 4.40 8.36% 2008-2009 4.41 2009 2009-2010 4.36 -1.12% 2010-2011 4.33 -0.55% 2011-2012 4.25 -1.92% 2014-2015 4.24 2015 2015-2016 3.80 -10.32% Estimated Yields 2016-2017 Scenario-1 3.99 5.00% 2016-2017 Scenario-2 4.11 8.00% Indonesia EI-Nino Pattern EI-Nino Years Years Yield(T/ha) % Change(Y-o-Y)   1981-1982 3.68 Very Strong 1982 1982-1983 3.85 4.66% 1983-1984 3.89 0.78% 1984-1985 3.40 -12.60% 1985-1986 3.42 Moderate 1986 1986-1987 3.08 -9.99% 1987 1987-1988 2.56 -16.87% 1988-1989 2.88 12.52% 1989-1990 3.34 1996-1997 3.02 1997 1997-1998 2.42 -19.95% 1998-1999 0.08% 1999-2000 2.86 18.17% 2001-2002 2.78 2002 2002-2003 3.00 7.97% 2003-2004 3.04 1.24% 2004-2005 3.09 1.73% 2008-2009 3.39 2009 2009-2010 3.44 1.33% 2010-2011 3.47 0.90% 2011-2012 3.63 4.57% 2014-2015 3.86 2015 2015-2016 -10.17%  Estimated Yields 2016-2017 Scenario-1 3.65 5.00% 2016-2017 Scenario-2 6.00%

Production estimates for 2016/17 ( Oct-Sep) All units in Million ton Country Acreage (ha) Yield (t/ha) Scenario-1 Production Yield(t/ha) Scenario-2 15/16 Production 14/15 Malaysia 5.01 3.99 20.00 4.11 20.57 17.92 19.88 Indonesia 8.85 3.65 32.26 3.68 32.60 31.12 32.50 Others 8.80 9.20 8.25 8.40 Total 61.06 62.37 57.24 60.78 All units in Million ton Global palm production is expected to rise by 5.70% during 2016/17 as per scenario-1 & 7.60% as per Scenario-2

Malaysia-Indonesia Production &Stocks Projection(Sep-Dec’16) After sharp surge in Sep’16 & Oct’16, stocks at main origins might stay on downward path in Nov’16 & Dec’16

Malaysia-Indonesia Stocks VS BMD Prices Combined stocks at origins likely to rise in Sep & Oct’16 and stabilize by Nov-Dec ‘16

Major Four global veg oil scenario   soy sun Palm Rape Overall Attribute 2015/16 2016/17 Beginning Stocks (MT) 3.71 3.30 2.09 1.20 9.56 7.44 5.63 5.50 20.99 17.44 Production (MT) 51.60 53.52 14.93 17.10 57.24 61.06 27.66 26.66 151.43 158.34 MY Imports (MT) 11.50 11.18 7.16 7.69 42.08 43.70 3.96 4.18 64.70 66.75 Total Supply (MT) 66.81 68.00 24.18 25.99 108.88 112.20 37.25 36.34 237.12 242.53 MY Exports (MT) 11.70 11.77 7.99 9.20 45.10 46.47 4.12 4.20 68.91 71.64 Industrial Dom. Cons. (MT) 8.99 9.25 0.65 0.70 13.40 14.30 8.21 7.94 31.25 32.19 Food & Feed Use Dom. Cons.(MT) 42.82 43.85 14.33 14.70 42.94 44.28 19.42 19.68 119.51 122.51 Total Consumption. (MT) 51.81 53.10 14.98 15.40 56.34 58.58 27.63 27.62 150.76 154.70 Ending Stocks (MT) 3.13 1.21 1.39 7.15 4.52 17.45 16.19 S/C Ratio 6.37% 5.89% 8.08% 9.03% 13.21% 12.20% 19.91% 16.36% 11.57% 10.46%

BMD CPO 3M Futures(MYR/MT): Elliott Wave Count-Short term Prices in the short term can have potential to correct lower towards MYR 2500 (preferred) or towards MYR 2350 (alternate view) ahead of turning higher.

BMD CPO 3M Futures(MYR/MT): Preferred Elliott Wave Count BMD CPO 3M Futures prices, after completion of intermediate wave-[B] of Cycle Wave 2 at MYR 2210 and currently prices are in a intermediate wave-[C]. Going ahead prices are likely to hold above MYR 2500 and trade higher towards MYR 3000/3150 in the 5-6 months.

Ukraine Sunflower Oil FOB 1M Forward USD/MT price outlook Ukraine Sunflower Oil prices are likely to hold above USD 740 and turn higher towards USD 900 in the 5-6 months.

Indian Oil complex

Rise in kharif oilseed production by 14% Kharif Oilseeds Production Estimates   2015-16 2016-17 P % Change Soybean 68.3 96.7 42% Groundnut (Unshelled) 25.3 35.1 39% Sunflower 0.8 1.6 100% Sesame 5.0 3.0 -40% Niger 0.6 0% Cottonseed 105.7 97.1 -8% Total 205.7 234.1 14% Lakh Tons Improved acreages and yield resulted in rise in production except cottonseed and sesame

Soy Crop situation across the main origins… Rajasthan MP MP MH MP MP MP Soybean Crop is in better condition when compared to last two years Damages reported in soy in certain pockets of Rajasthan, Ahmednagar Division in Mah and East MP On the whole, a double digit growth in yields is inevitable this year Rajasthan

AYP Soybean 2016-17… State Telangana + AP Chhattisgarh Karnataka Madhya Pradesh Maharashtra Rajasthan Others India Acreage ( Million ha) 2015-16 0.25 0.14 0.28 5.61 3.58 1.11 0.17 11.14 2016-17 0.30 0.13 0.32 5.40 3.97 1.09 11.38 Yield ( Kg/Ha) 590 500 540 637 530 810 560 613 980 750 710 830 920 720 790 850 Production ( Million ton) 0.15 0.07 3.57 1.90 0.90 0.10 6.83 0.29 0.23 4.48 3.65 0.78 9.67 Annual Soybean Balance sheet (MY: Oct-Sep) Indian soybean Balance sheet 2015-16 2016-17 P Crop size 68.50 96.70 Marketable Surplus 53.90 81.50 Estimated old crop stocks with crushers/stockiest 9.41 8.61 Total Supply 63.31 90.11 Arrivals (Oct-Sep) 57.03 82.00 Crush (Oct-Sep) 54.70 80.00 To be arrived 6.28 8.11 Stocks with crushers and stockiest (Ending Sep) 2.33 2.00 Total uncrushed seed available 10.11 Source: Industry and TG research; All Units in lakh tons A production estimate of 9.67 million tons expected with an average yield of 850 kg per hectare which is below the median yield of 927 kg per hectares and mean yield of 908 kg per hectare

Indian Soymeal exports …can we bounce back ?? Soy Meal Exports in Thd Tons   2011-12 2012-13 2013-14 2014-15 2015-16* Country Wise South Korea 141 142 154 2 Thailand 369 287 143 7 11 Vietnam 553 379 87 13 Japan 867 565 183 25 1 Indonesia 167 84 86 27 Iran 518 999 701 194 France 103 277 307 110 Others 762 706 357 213 17 Total 3479 3438 2020 591 36 Region Wise South East Asia 1185 820 356 22 Far East 1064 740 349 39 Middle East 779 1208 824 245 12 Europe 363 654 463 195 89 28 9 * Till July 2016 Indian Meal Balance Sheet (Oct-Sep) Parameter 2015-16 e 2016-17 p Beg Stock for Season 3.04 3.14 Crush 54.70 80.00 Meal Production 44.31 64.80 Supply 47.35 67.94 Export 0.43 16.50 Dom 43.00 47.30 PNB 0.78 0.20 Total Demand 44.21 64.00 End Stock 3.94 Units:- Lakh tons Domestic Soy Meal consumption basket   2015-16 2016-17 Poultry Feed 35.63 38.85 Aqua Feed 1.3 1.9 Pet Food 0.5 0.6 Cattle + Hog Feed 0.12 0.15 Food Uses 5.45 5.8 Total Consumption 43 47.3 Lakh Tons Exportable Surplus of soy meal is expected to be 16.5 lakh tons in 16/17 Major Buyer could be South East Asian Nations as the bean tightness at South America likely to bring parities to indian meal

South East Soy Meal Market still looks bright if the price parity becomes favorable.. Pork and poultry meat production is expected to rise y-o-y basis and thus the soybean and soy meal demand will remain intact

Rising domestic production and reduced dependency on imports in 16/17 Indian Edible Oil balance sheet ( Nov-Oct)   2014-15 2015-16 Proj 2016-17 Est % Change Beginning Stock 11.7 21.1 17.9 -15.1% Production 63.2 61.1 74.8 22.4% Imports 144.2 149.0 154.0 3.4% Total Supply 219.1 231.2 246.7 6.7% Industrial Use 8.8 9.2 9.4 2.2% Food Use Consumption 198.0 213.2 232.0 8.8% Total demand 206.8 222.4 241.4 8.5% Stocks at ports 12.0 8.4 8.3 -1.2% Stocks in Market 9.5 6.4 -32.7% Ending Stock 14.7 -17.9% In Lakh tons (OY) Domestic production in India likely to keep import dependency lower as the Rabi oilseed prospects seem to be promising due to good reservoir levels and moisture replenishment

NCDEX Soybean Futures: Price Direction NCDEX Soybean Future prices are likely to hold support of INR 3100 on any further weakness and trade positive towards 4000 zone in coming 5-6 months.

Soymeal FOR Kandla: Price Direction Soymeal FOR Kandla prices are expected to find support near INR 29000-30000 and turn higher towards INR 37000 in coming 5-6 months.

NCDEX Ref Soy Oil Futures: Price Direction NCDEX Ref. Soy oil prices are seen consolidating in the zone of INR 670 to 620 in the last few months. Going ahead prices are likely to stay above INR 650 and trade higher towards INR 690/700 in the coming 3-4 months.

MCX CPO Futures: Price Direction MCX CPO Futures price are likely to hold above INR 530 and trade higher  towards INR 635/640 in the coming 5-6 months.

Price Outlook Summary Markets Last Closing (Sept 19, 2015) (0-4/6 months) BMD Palm Oil Futures, MYR/MT 2643 2450-3050 CME Soy Bean Futures, Cents/Bu 979.50 900-1250 CME Soy Meal Futures, USD/short ton 302 285-400 CME Soy Oil Futures, Cents/lb 33.05 31.5-39 NCDEX Soy Bean Futures, INR/Qtl. 3250 3150-4100 NCDEX Soy Oil Futures, INR/10Kg 645.50 650-700 Soy meal FOR Kandla, INR/MT 30500 29000-37000 MCX CPO Futures, INR/10kg 566.90 530-640